Abstract

The electron microscope improved our vision by a factor of one million. Humans could finally see atoms. This study aims for a similar leap by studying trades at nanoseconds, a million times more precise than often used milliseconds. This enables one to observe asset re-allocations among rapid-fire tradebots, including those employed by high-frequency traders (HFTs). Twenty percent of trades arrive in sub-millisecond clusters. Importantly, these clusters do not seem to feature price instability. However, they are costly to nonHFTs in terms of adverse selection, but they can be avoided.

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